Proprietary estoppel is a legal remedy that can be used when a landowner has promised property will be transferred to someone else at a later date, only to later renege on their statement. It’s often used as an alternative claim by people looking to contest a will.
It can occur, for example, when a parent has promised land or property to a child, either verbally or by conduct, but states something different in their will. This commonly happens with farming businesses where offspring have worked for many years on low wages, believing they will one day inherit the farm.
It could also be the case that someone has invested money into a property by way of maintenance or improvements in the belief they would own the building in the future, only for it to be left to another party.
If the claimant can satisfy the courts that a clear, unambiguous promise was made - and other specific conditions are met, including the assurance led to detrimental actions such as rejecting other career opportunities - then an estoppel claim is possible.
A successful proprietary estoppel claim does not necessarily mean the property will be transferred in its entirety to the claimant. The court has the discretion to set the award, either land or monetary, based on a broad range of factors, including the conduct of the parties involved and whether there are any other claims to the property.
The court will order a remedy it considers proportionate to the detriment incurred.
How might proprietary estoppel affect you?
It can be devastating to work a lifetime, overlooking other job or life opportunities, only to be left with nothing.
If someone has made significant life decisions based upon the assurance of property at a later date and that promise does not materialise, proprietary estoppel can offer an equitable solution.
Proprietary estoppel often involves family businesses that own, and are dependent on, land or property, where members have devoted a large proportion of their lives to the company, often sacrificing their own earnings having been told that they will one day own the property themselves. “One day all of this will be yours”, is a common thread in estoppel cases. An unfulfilled promise can cause serious detriment to people’s lives. For example, a younger member of a family is dependent on the land to run the family business, and they do not inherit the land, their ability to earn an income will suffer.
It’s also possible that someone has lived in the family home to help a parent for many years – sometimes decades – only to discover the property has been left to another party in the will, such as a step-parent. This can be a deep injustice as the child would not only miss out financially, but they would also lose their home should the step-parent decide to sell it.
It is these types of unfair outcomes that proprietary estoppel seeks to prevent.
What are the three rules of proprietary estoppel?
In order to bring a successful proprietary estoppel claim, three essential elements must be present:
- Assurance – A claimant must prove there was a representation or an assurance which created the expectation that they would later become entitled to the land, either in whole or in part. This can either be in words or in conduct. Evidence from a third party (with no interest in the matter) that a verbal promise was made that the claimant was to have an interest in the land can be very beneficial.
- Reliance – The courts will consider to what extent the claimant has relied on the promise being fulfilled. They will expect the claimant to have made significant life decisions or career choices based on the promise. This could include moving to a property close to the land they believed they were set to own, or turning down more lucrative job opportunities.
- Detriment – The claimant must be able to demonstrate that they acted to their detriment. Generally, this means financially and tends to be when a person has rejected job offers or the chance of a different career as a result of a promise they believed to be active.
Whilst all three of these criteria must be present in order to make a successful proprietary estoppel claim, the courts have in more recent years adopted a more holistic approach than in the past, looking at the whole picture, rather than each of these three elements individually, to try and ensure that an equitable outcome is achieved.
What are the issues with proprietary estoppel?
Proprietary estoppel is notoriously difficult to pursue, not least because the person who is alleged to have made the promise is either dead or denying all knowledge of the assurance.
There has also often been a family breakdown which has led to the claim, resulting in hostile arguments and an unwillingness to compromise. For example, if a parent’s estate consists mainly of farming land that one child is dependent on for their income, a sibling who inherits a share may be unwilling to give this up in favour of the sibling who claims they were in receipt of a promise unless they can be compensated by way of other assets, which aren’t always available.
Courts struggle to quantify the true extent of either the claimant’s reliance on the promised property, or by how much they have missed out financially as a result of detrimental decisions made due to the promise.
Courts deal with proprietary estoppel on a case-by-case basis meaning precedent can be hard to rely on.
Is there a time limit for proprietary estoppel claims?
There is no strict time limit for proprietary estoppel claims. However, if there has been a long delay, this can be used as a defence to a claim.
What is the difference between promissory estoppel and proprietary estoppel?
Promissory estoppel is different from proprietary estoppel in that it is used when a formal, contractual relationship or legal obligation already exists between two parties.
In this instance, a promise has been made to modify the agreement – but it has not been formalised in writing. For example, a supplier agrees to waive a month’s fees for a customer but later goes back on the verbal agreement and demands payment. Promissory estoppel can be used as a defence if the recipient of the promise can prove all of the following: a contract was modified by a promise, that it was a clear and unambiguous assurance, that there had been a change in position which caused financial harm AND it is inequitable to allow the promisor to go back on their word.
How do you defend against proprietary estoppel?
It is in everyone’s interest to try to document all property agreements in writing so all parties know where they stand. Equally important is to not make promises or create expectations if you don’t intend to fulfil your side of the bargain.
Individuals and families who own land/property crucial to running a business should consider their succession planning at the earliest opportunity. All family members, whether they be involved in the business or not, who may reasonably expect to gain an interest in the land/property at some point (e.g. following the death of an owner)should be involved in open and honest conversations so more than one person hears the desire of the land/property owner or owners.
Making a will is also important, and this can be supported by letters of wishes so the thinking behind succession is laid out transparently.
People facing a proprietary estoppel claim should seek expert legal advice at the earliest opportunity.
Proprietary estoppel cases in the UK
Davies v Davies [2016]
Eirian was one of three daughters to grow up on a family farm in Carmarthenshire. By the time Eirian was 17 it was clear that she was the only one of the siblings who had any interest in running the farm in the future.
The parents were keen for the farm, worth around £7m, to remain in the family. Though there was no binding agreement that Eirian would inherit the farm, it was found that she had been promised she would do so in return for her work over the years.
In reliance on this promise, Eirian had not pursued any other career avenues and had worked long hours, either without any pay or for reduced pay.
Though she left the farm on several occasions following disagreements with her parents, she was at one stage shown a draft will demonstrating she would inherit the land, buildings and shares in the business.
A further altercation saw Eirian leave the business again in 2012, and she then brought a claim seeking an interest in the land and business. The court agreed that she was entitled to stop her parents from reneging on their promise, and Eirian was awarded £1.3m, later reduced to £500,000 on appeal.
Habberfield v Habberfield [2019]
Here, a daughter, Lucy, successfully made a proprietary estoppel claim as the High Court was satisfied her parents, Frank and Jane, had promised her she would take over the family farm worth £2.5m when they retired.
Lucy had worked on the farm for 30 years, working very long hours, primarily in the dairy unit, for low pay and with few holidays. She had been content to continue working in those conditions with the promise of one day owning the business.
In 2013, she left the business following a dispute with her sister. When her father died in 2014, he left the farm to his wife, and she closed the dairy unit.
The mother, Jane, argued that Lucy had waived her inheritance rights when she turned down the offer of a formal partnership in the farm in 2008 – but the Judge disagreed.
The High Court ruled that the daughter had suffered a detriment due to a reliance on her parents’ assurances and was awarded £220,000, along with £1.2m to acquire a viable dairy unit elsewhere. The Judge ruled that the money should be raised by selling the existing farm – even though that meant Jane leaving her home.
James -v- James [2018]
The son, known as Sam, claimed his deceased father had promised him land that had been part of a previous farming business.
Sam had worked on the Dorset farm all of his adult life and was a partner in the business until a disagreement saw the partnership dissolved.
Consequently, the father left the land to his wife and two daughters in his will.
In this case, the court found no evidence of the alleged promise beyond the son’s words. The court ruled that if a comment had been made it was, at best, a statement of current intention rather than a binding promise.
This subtle difference between a statement of intention and a definite promise is often a stumbling block in proprietary estoppel cases.
Furthermore, the court ruled that the son had received a fair wage while working at the family business, as well as living rent-free on the land, and there was no evidence that he had ever pursued an alternative career. The court consequently ruled that he could not satisfy the detriment test.
Guest and another v Guest [2022] UKSC 27
The son, Andrew, lived and worked on his parent’s farm for 32 years after leaving school, with increasing responsibilities. He was paid for his work but at relatively low rates. Andrew claimed that his parents had promised him he would inherit a substantial share of the farm, sufficient to enable him to continue a viable farming business after his father’s death.
However, it transpired that his parents had made wills leaving the farm to Andrew and his brother in equal shares, subject to a gift of 20% of the estate to their sister. Then after a disagreement between Andrew and his parents, they removed him from their wills completely, dissolved their farming partnership with Andrew, and gave him notice to quit the property on the farm on which he and his family lived. Andrew sought a declaration of entitlement to a beneficial interest in the farm.
This case made it all the way to the Supreme Court, which was asked to decide whether the claimant’s expectation of what would be theirs was an appropriate starting point when considering a remedy.
The court said the starting point should be deciding whether allowing the promisor to go back on their promise would be unconscionable. If it were, the court should proceed on the assumption that the simplest way to remedy that unconscionability is to enforce the promise to transfer the property in question. The starting point is, therefore that the likely remedy will be the enforcement of what was promised. However, the court said it may have to consider alternatives, such as providing a monetary equivalent if enforcing the promise would cause injustice to others.
For example, if the recipient of the promise wasn’t promised the property until a point in the future (e.g. after the death of the parent), then this will need to be taken into account in determining the value of the remedy.
Also, if the enforcement of the promise, or monetary equivalent, would be out of all proportion to the detriment of the promisee, then the court may need to limit the remedy. Finally, the court should consider in the round whether a particular remedy would do justice in the circumstances.
This case tells us that whilst the courts will bear in mind what the promise was for and will enforce it in certain circumstances, it will also spare a thought for the bigger picture and the overall result of enforcing a promise.
